The Tipping Point Of Tipping: The Gratuity Controversy

No, this is not a review of Malcolm Gladwell’s excellent book, but it is a discussion on one of the reasons why Mr. Gladwell titled his book, The Tipping Point, that way. A tipping point is actually a critical point in an evolving situation that leads to a new and irreversible development. The term is used in many disciplines: climatology, epidemiology, and even in chaos theory—where the tipping point is defined as the unpredictable movement of something that leads to unpredicted results. So, this last definition, ironically, defines the tipping point of tipping. Read on!

Many have never considered tipping to be a controversial act—it seems like such a common occurrence. But now, in 2013 and probably into the coming years, the act of tipping and its underlying social meaning is becoming more controversial and surely more nuanced.

In September of 2013, New York Times restaurant critic Pete Wells wrote an article in the Times that caused substantial controversy about tipping on both sides of the dining table: from customers and from servers.

Called, Leaving A Tip—A Custom In Need Of Changing? Wells says you can leave all the 20 percent tips you want, but your server doesn’t see the extra cash until after your meal is finished, so what is the point of paying for service after the fact? Tipping, he says, “…is irrational, outdated, ineffective, confusing, prone to abuse and sometimes discriminatory. The people who take care of us in restaurants deserve a better system, and so do we.”

Wells suggests that the recent growth of anti-tipping sentiments, from both within and outside the industry, may have to do with the now-standard use of paying for meals with credit cards. For years, tips were mostly in cash. Servers did well because they were paid immediately. But ironically, credit cards make it easier for the customer to provide a decent tip, especially if they do not carry enough cash to provide one, however using a credit card also means more of an accounting headache for both the restaurant and the server, because the server has to consider a credit card tip part of his wages, and for the restaurant, the full amount of the gratuity has to be considered as revenue by the establishment, and must pay taxes on that income.

Wells also points to another issue that many diners might not be aware of—most kitchen employees do not share in the tips provided to servers, sometimes resulting in a huge disparity between those who make the meal and those who serve it.

This is one reason why many restaurants in recent years, employed the 18 percent service charge that is put on the bill and is shared by the whole restaurant staff. But this strategy opened another can of worms. The legality of the 18 percent service charge came into question, as legally some of the money goes to those who are not providing direct service to the customer. The 18 percent service charge is a good idea in theory, but in practice? The story of San Diego’s farm-to-table restaurant, The Linkery, is symbolic of the complex nature and unfortunate side effects of this idea’s implementation.

In July of this year, The Linkery closed its doors, after a run of five years. The Linkery had instituted a standard 18 percent service charge in lieu of tips, and had refused to accept any other gratuity from the customer. The upshot, as owner Jay Porter explained in a set of takeaways he discussed on his blog calledObservations From A Tipless Restaurant, said that people resented The Linkery for taking away the power to tip. He said, “The Linkery’s most transgressive act was not in implementing a service charge. Our most transgressive act was refusing to allow our guests to pay our servers anything more beyond the service charge—this is where the angry came out.”

This ironic conundrum—anger at not tipping even though the service and food improved—was further documented, according to Mr. Porter’s article in the August 14, 2013 online edition of Slate, when he writes, “…when we switched from tipping to a service charge, our food improved, probably because our cooks were being paid more and didn't feel taken for granted. In turn, business improved, and within a couple of months, our server team was making more money than it had under the tipped system. The quality of our service also improved. In my observation, however, that wasn't mainly because the servers were making more money (although that helped, too). Instead, our service improved principally because eliminating tips makes it easier to provide good service.” But still, the restaurant closed.

What Mr. Porter inferred is somewhat similar to what Dr. Ofer Azar said in a 2010 paper published in Applied Economics, that tipping is largely the result of psychological motivations. From Mr. Porter’s views that customers not being allowed to tip beyond the service charge angered them because their sense of control was removed, to Dr. Azar’s ideas that a tip is not given only for excellent service, but to maintain an image of generosity, often in the face of some social pressure, both reflect diverse and a deeper-seated customer interpretation. These ways of thinking have come a long way since the tip’s inception.

Tipping was an idea and practice imported from Europe, specifically from Tudor England, where there were major class distinctions between servers of any stripe, customers, guests and/or consumers. By the 17th century, overnight guests in private homes, or pubs, would provide vails, or basically tips to the host’s servants. One story, which sounds true, especially if you read Boswell’s Life Of Samuel Johnson, is that Johnson, a great 17th century essayist, frequented a Pub that had a bowl printed with the words “To Insure Promptitude,” i.e. TIP. But even then, that word was a bastardization of the original meaning: gratuité, meaning literally in Medieval French, something that was freely given.

The point is, that tipping, whether freely given or subtly coerced, began as a definer of how wealthy one was in aristocratic circles. If one felt kindly, moneyed people could give something to an apparent inferior who was serving them in some way. This practice became very common in Europe, but when it came here to the United States, it always engendered controversy. There is no consistent social or published history of tipping in the United States, the consensus, in other words, we the people, never did care much for practices that underscore class distinctions. No matter what, many feel that tipping has consistently created feelings of imbalance, and outright angst, no matter what size the tip. This unease may be one of the roots of why so many problems, all of which were created to help democratize this elitist idea, has occurred in recent years. One problem was the 18 percent service charge.

One of the first restaurants to add a pre-tip, service charge to the bill was Chez Panisse, Alice Waters’s famed restaurant in Berkeley, California. Her argument for this charge was one of rebalancing and democratizing the kitchen culture, so there would be more equity between servers, support staff and cooks. The percentage would be split between them. Many other high-end restaurants followed suit—Charlie Trotter’s, The French Laundry, Per Se and even The Linkery. It was discovered that many people still tipped beyond this service change, and the waiter kept that tip, which Mr. Porter believed, took the problem back to square one. Mr. Porter’s decision—not allowing the customer to tip beyond his 18 percent service charge—was, in his opinion, the reason his restaurant closed.

So what is the future of tipping? Now, many high-end restaurants have eliminated the 18 percent service charge, and instituted two strategies that seem to be working in greater concert. First, prices of restaurant food have been raised, and due to that price increase, no-tipping policies have been put into effect. These are the ones that Mr. Wells of the New York Times, hopes will change the extremely subjective tipping policies right now.

One of the reader’s comments about Mr. Wells’s article was given a NYT Recommend, which meant that many people, including the editors—agreed. It defined how frustrating tipping is for the diner, whether it is at a fine dining establishment or a lesser one. Here is a portion of what the impassioned Mr. Adelman of Philadelphia said, "...when I look at the prices on a menu, I get annoyed because they're not the real prices—it's a kind of false advertising—the price on the menu does not show the tip. It's deceptive. That Branzino is not $25; it's $30 with the tip! …Tipping seems to encourage annoying behavior on the part of servers. I really don't want to know the name of the server, nor engage in friendly banter, nor get checked-up on mid-conversation—I just want prompt, friendly service—thank you. Last, after dinner, with wine perhaps, and plenty of conversation, especially in a larger group, who the heck wants to do a lot of arithmetic? Just give us the check with, at most, a simple problem of division—not the calculus of the tip... And why is it that in places like Japan and France, without the nuisance of the tip, the service is better, I'd like to know... Restaurateurs, pay your people, put the actual price on the menu, and study the Japanese for how to provide quiet, efficient service, where the check is on the table along with the last dish...and no further hassle."

The subtext of this tipping argument defines a tipping point—or attitude change—for most consumers. We all want to do what is fair, but how to do so remains a complicated, multi-opinioned matter. Strategies to objectify, through pre-tip service charges, may be experiments that succeed, or fail, especially when the legal variable is included. But given the argument that Mr. Wells and Mr. Porter have put forth, a large scale attitudinal change toward the elimination or the redefinition of the tip may be closer than we think.

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